Recent criticism has been levelled at the Australian Taxation Office, in that they are using disturbing and heavy-handed tactics to target small businesses.

As practitioners of Springdale Legal have substantial experience within the Commonwealth operations of the ATO, ATO liabilities and rights of individuals are here discussed in detail.

As a precis, a prominent Australian barrister has said of the ATO:

“People are brought up to believe they have the presumption of innocence, that they have the right to remain silent, if they’re questioned by the authorities, that the authorities are obliged to read them their rights, if they get into trouble, and that their assets can’t be confiscated by the authorities. Now, in the world of tax, none of those things is true.”

One particular ATO action which has been widely criticised is the decisions by the ATO to cancel business ABNs because they should have been classifying contractors as employees. It is one reason why this matter of classification is so important to small business. We have previously written abut the factors which influence whether your workers should be categorised as employees or contactors.

The Inspector General of Taxation, Ali Noroozi told a joint Four Corners and Fairfax investigation that in roughly 5 per cent of cases — or one in 20 — the tax office gets it wrong.

Despite these unequivocal errors by the ATO, the ATO is not without regulation or oversight. In fact, aggrieved parties have several areas of recourse.

The Inspector-General of Taxation and Taxation Ombudsman (IGTO) is an independent Officer appointed by the Governor-General of Australia to lead an free service to assist the Australian community with the tax system. They seek to improve taxation administration and help with complaints about the administrative actions of the Australian Taxation Office (ATO) and the Tax Practitioners Board (TPB). They are completely independent from the ATO and the TPB.

You may wish to contact them if you:

  • have enquiries about tax and getting the assistance you need;
  • investigating a complaint you have about the ATO and the TPB; and
  • wish to have reviewed the operation of the tax administration laws and system.

The Compensation due to Detriment causd by Defective Administration (CDDA scheme) is another recourse if ATO action has caused you detriment.

It applies broadly, if any of the following has occurred, which have caused personal injury loss, pure economic loss, damage to property, for you (the applicant):

  • a specific and unreasonable lapse in complying with existing administrative procedures; or
  • an unreasonable failure to institute appropriate administrative procedures; or
  • an unreasonable failure to give to (or for) an applicant, the proper advice that was within the officer’s power and knowledge to give (or reasonably capable of being obtained by the officer to give); or
  • giving advice to (or for) an applicant that was, in all the circumstances, incorrect or ambiguous.

In cases where it has been established that there is no legal liability to pay compensation, the CDDA Scheme provides a mechanism to compensate persons who have experienced detriment as a result of defective actions or inaction.

The CDDA Scheme is discretionary as well as permissive. It does not oblige the decision-maker to approve a payment in any particular case. This means there is no automatic entitlement to a payment. The CDDA Scheme is generally an avenue of last resort and is used only where there is no other viable avenue to provide redress. That a mistake has been made by an entity or an official of an entity does not automatically mean compensation is payable under the CDDA Scheme.

There are specific criteria, and evidence requirements, for making a CDDA Claim. To maximise your chance of success, legal advice should be sought.